Corbett's administration, it says, "laid siege to OARC by denying it the use of funds while feigning an elongated investigative process in which no answers are ever given."
OARC wants a judge to rule that the governor and his secretaries of the budget and economic development have abused their discretion, and force them to honor the contracts.
A spokesman for the Corbett administration said it was aware of the claims but declined to discuss them.
"As a general statement, the administration will continue its commitment to protect taxpayer dollars through assuring transparency and accountability in the expenditure of public funds," Steve Kratz said.
Filed Monday in federal court in Philadelphia, the suit is the latest salvo in a behind-the-scenes scrap between the Republican governor's administration and two Philadelphia nonprofits with long ties to State Rep. Dwight Evans, once one of the city's most powerful Democrats in Harrisburg.
Evans founded OARC in 1983. During his two-decade tenure as the ranking Democrat on the Appropriations Committee, which approves state funding, OARC and another city nonprofit, the Urban Affairs Coalition, were among the biggest recipients of state grants.
The Department of Community and Economic Development acknowledged in November that it was reviewing funding for both groups and had frozen their funding.
State officials won't share details of their inquiry, nor will representatives of the two groups.
'In the dark'
A confidential report obtained by The Inquirer said a team of auditors hired last year by the state Office of Inspector General concluded that the Urban Affairs Coalition may have mismanaged $1.5 million in grants. Representatives from the coalition have denied any wrongdoing and complained that state officials have not shared results of any probe.
OARC makes the same claim in its suit, though it does not mention audits, Evans, or any other nonprofits. It says the state claims to have found "irregularities" in some contracts but will not disclose the findings.
"OARC has been kept in the dark as to any specific reasons for DCED's conduct in cutting off and/or terminating grant funds, while being strung along in a process of requests from DCED for more information," the suit says.
OARC president Jack Kitchen declined to comment Wednesday. A lawyer for the group said that he and OARC officers would be "happy to sit down with anybody from the state" but that their requests had been rebuffed.
"Nobody's been willing to tell us what these so-called irregularities are," said lawyer S. David Fineman, who filed the suit.
Contracts at issue represent a fraction of the money OARC has secured over the years, but reflect the kind of projects the nonprofit touts as its achievements: buying and rehabilitating blighted properties, renovating a charter school, and reinvigorating a shopping district.
After taking office in 2011, Corbett pledged to review state redevelopment funding and scrap the backroom dealing that long helped legislators steer money to projects in their districts.
Two grants under scrutiny flowed in 2010 from the Redevelopment Assistance Capital Program, a funding stream that exploded during the Rendell years but has been scaled back by Corbett. They included $700,000 targeted for renovations at the West Oak Lane Charter School and $500,000 for redevelopment of the Ogontz Avenue plaza. The grants, approved in the waning months of Rendell's tenure, were to be doled out in increments over years.
Last February, Budget Director Charles Zogby notified Kitchen that the contracts were being canceled. His letter cited a review by the state of "which projects were best positioned to move forward."
The lawsuit noted that the school renovations were nearly complete by that the time and called "patently false" any suggestion that the project was not positioned to move forward.
OARC also claims that DCED suspended other contracts after the organization sought to modify or extend the terms, or shift the spending to reflect changing costs, a practice it says had been customary and approved by state redevelopment officials in the past.
One was a $1 million grant that funded the West Oak Lane Jazz Fest; another was a $100,000 contract to hire a consultant to build up sponsorship for the jazz event. DCED rejected the changes and ordered the contract closed.
Begun in 2003, the jazz festival was canceled this past summer for the first time.
Contact John P. Martin
at 215-925-2649, at email@example.com, or @JPMartinInky on Twitter.